ТОП просматриваемых книг сайта:
Encyclopedia of Chart Patterns. Thomas N. Bulkowski
Читать онлайн.Название Encyclopedia of Chart Patterns
Год выпуска 0
isbn 9781119739692
Автор произведения Thomas N. Bulkowski
Жанр Ценные бумаги, инвестиции
Издательство John Wiley & Sons Limited
| Bull Market | Bear Market | ||
| Reversal or continuation | Long‐term bullish reversal | Short‐term bullish reversal | |
| Performance rank | 11 out of 39 | 8 out of 20 | |
| Breakeven failure rate | 9% | 9% | |
| Average rise | 46% | 30% | |
| Volume trend | Downward | Downward | |
| Throwbacks | 64% | 66% | |
| Percentage meeting price target | 74% | 55% | |
| See also | Bearish bat, double bottoms (all varieties) | ||
A big W is nothing more than a double bottom with a tall left side. It might have a tall right side, too, but that depends on how well the stock performs after an upward breakout. If price doesn't break out upward, then it's not a big W. I'll discuss identification guidelines later.
The above Results Snapshot shows important performance numbers for the big W. For example, the breakeven failure rate, at 9%, is quite good (meaning relatively small compared to other chart pattern types). The average rise for perfect trades is 46% (bull market), which is also good, hence the rank of 11 where 1 is best. Bear markets see price climb by 30%, which ranks 8 out of 20, where 1 is best.
If you use the full height of the pattern in the measure rule computation, price will reach the target 55% to 74% of the time (bear, bull markets, respectively).
Let's look at examples of big Ws.
Tour
Figure 7.1 shows what a big W looks like. The pattern has the first bottom at B, the second one at D, with a hill in between, C. The pattern confirms as valid when price closes above the top of the hill.
The left side of the pattern begins at A, which is what I call the launch price. The stock drops in a straight‐line run down to the first bottom of the big W.
After the big W forms the second bottom, price recovers. In this example, the stock rises to E in a quick sprint higher from the low at D. That's still well short of the launch price, A. After point E, the stock is like a speedboat pulling a water skier. You get a lot a thrust to get the skier on top of the water (to E) and then the boat planes out (on the way to F). It's possible that the stock will recover and post a new ultimate high, so F is tentative until more data arrives.
Volume (G) has a U‐shape (in this example) until the spike at D. Linear regression says volume trends upward from bottom to bottom, so that's why I drew the line sloping higher at G. Volume for the big W trends downward most often, though.
Figure 7.1 This big W sees price rise, but not very far.
Identification Guidelines
Table 7.1 shows identification guidelines for the big W and refer to Figure 7.2 for guidance.
Appearance. The big W is a form of double bottom, one with a tall left side, and if the pattern works as it's supposed to, a tall right side as well. The two valleys should bottom near the same price (use your best judgment as to how close the bottoms need to be to each other). Often the bottom‐to‐bottom variation is small (the median is 14 cents).
Table 7.1 Identification Guidelines
| Characteristic | Discussion |
|---|---|
| Appearance | Price forms twin bottoms at or near the same price with an unusually tall left side. A well‐formed pattern should remind you of a big W (that is, if price on the right side rises to match the left). |
| Price trend | Downward, leading to the first bottom. Look for a long, steep drop often at least the height of the pattern (from the lower of the two valleys to the peak between the valleys) above the top of the pattern. See text. |
| Volume | Downward the majority of the time, but don't exclude a big W with a rising volume trend. |
| Breakout direction, confirmation | To break out, price has to close above the peak between the two bottoms, confirming the pattern as valid. Without an upward breakout, you don't have a big W. |
| Duration | No minimum duration and the longest pattern I studied is about 9 months wide. |
Figure 7.2 Price at F almost returns to the launch price, A.
Price trend. The downtrend from A to B is a steep drop like that shown in the figure. You want to avoid patterns that see price meander or even move sideways as the drop approaches B. If price takes its time reaching the first bottom, then the chart pattern is probably a double bottom (see one of the Adam & Eve varieties).
Eyeball the height from the center peak between the two bottoms to the lower of the two bottoms. Then make sure the left side of the pattern is at least that height above the central peak.
For example, the height of the big W is the high price at point C minus the low at B. The left side must be at least this height above C. In this case, the downtrend begins at A, which is well above C, so the downtrend from A to B is tall enough. A tall left side is what separates big Ws from double bottoms. A big W is a type of double bottom, but few double bottoms are big Ws. I hope that makes cents (sense).
Volume. Don't disqualify a big W because of its volume trend. However, most of the time, you'll see volume trending lower from valley B to D. Linear regression on the big W shown in the figure says volume slopes upward. It doesn't look like it does, but the numbers say otherwise. I show the upward trend at H.
Breakout direction, confirmation. Price always breaks out upward from a big W. If it doesn't, then you don't have a big W. A breakout occurs when price closes above the hill between the two bottoms. In Figure 7.2, that would be a close above C, which I show as a horizontal line at E.
Price confirms the big W as a valid chart pattern when it closes above C. Again, if you don't have confirmation, then you don't have a big W.
Duration. I did not set a minimum or maximum width between the two valleys. They ranged from a very narrow 4 days to 260 days. I looked at the 4‐day pattern, and it looks fine.
Focus on Failures
Figure 7.3 shows what the failure of a big W to perform looks like.